‘Kangaroos’ refer to the Australian stocks that are part of the country’s benchmark All-Ordinaries Index. This index encapsulates the stocks of the most actively traded companies in Australia.
Key Takeaways
- Kangaroos colloquially refer to the stocks in the Australian All-Ordinaries Index.
- The All-Ordinaries Index is a benchmark representing the market value of the 500 largest traded companies by market capitalization in Australia.
- ‘Kangaroos’ can also reference Australian dollar-denominated securities issued in Australia by foreign entities.
A Comprehensive Guide to Kangaroo Stocks
Kangaroo stocks form part of the All-Ordinaries Index, which is the most respected benchmark index for the Australian equity market. The Australian Stock Exchange oversees the calculation and distribution of this index. Debuting on December 31, 1979, the All-Ordinaries Index has the distinction of being the oldest index in Australia and includes around 500 companies.
The base value of the index started at 500.00, set at the end of trading in 1979, and subsequent changes in the index reflect the movement of the aggregate market values of the member companies. Consequently, the index mirrors the larger ‘big-picture’ performance of the shares rather than individual stock movements.
To be included in the All-Ordinaries Index, companies must have a market valuation making up at least 0.2% of all domestic equities quoted on the Australian Stock Exchange and boast an average turnover of 0.5% of their quoted shares per month. Larger companies in terms of capitalization have a more prominent influence on the index’s overall performance compared to smaller firms.
Quick Note: The financial sector forms the major portion of the Index, followed by materials and industrial sectors.
Total Market Performance
Given that the All-Ordinaries Index is weighted by market capitalization, it denotes the collective market performance rather than isolating the activity of specific stocks. Although the Index doesn’t cover dividends distributed to shareholders, which means it does not fully represent total returns on investments, it provides a robust reflection of market trends.
The Australian Stock Exchange reviews the Index monthly to ensure the continued eligibility of companies and incorporates changes due to delistings, new additions, and capital activities.
Delving into the Kangaroo Bond Market
Kangaroos can also denote a foreign bond issued in Australia’s market, known as a kangaroo bond. These bonds are denominated in Australian dollars and are issued by non-Australian companies, aiming to diversify their debt profiles while accessing Australia’s investor base.
Corporate entities, financial institutions, and international governments frequently issue kangaroo bonds. Often, U.S. and German market participants are prominent issuers. These bonds particularly appeal when Australia’s interest rates are lower relative to the foreign issuer’s domestic rates, aiding in cost-effective borrowing.
Similar Foreign Bonds
Kangaroo bonds share similarities with other foreign bonds issued on different markets, including Samurai bonds (Japan), Maple bonds (Canada), Matador bonds (Spain), Yankee bonds (U.S.A), and Bulldog bonds (UK). Each of these bonds provides diversified investment possibilities in the issuing foreign markets.
Related Terms: Australian Stock Exchange, market capitalization, market value, foreign bonds, financial market, investment
References
- S&P Global. “Stock Exchange All Ordinaries Index”.
- Market Index. “History of the ASX”.
- Parliament of Australia. “Stock Exchange All Ordinaries Index”.
- Reserve Bank of Australia. “The Kangaroo Bond Market”.
